Amer. Trucking Assns. v. Scheiner
483 U.S. 266 (1987)

Annotate this Case

U.S. Supreme Court

Amer. Trucking Assns. v. Scheiner, 483 U.S. 266 (1987)

American Trucking Associations, Inc. v. Scheiner

No. 86-357

Argued April 28, 1987

Decided June 23, 1987

483 U.S. 266

APPEAL FROM THE SUPREME COURT OF PENNSYLVANIA

Syllabus

This case presents the question whether the Commerce Clause of the Federal Constitution is violated by two Pennsylvania statutes which impose lump-sum annual taxes on the operation of trucks on Pennsylvania's highways. One challenged statute requires that an identification marker be affixed to every truck over a specified weight, and imposes an annual flat fee ($25 from 1980 through March 1983) for such marker. The statute exempts trucks registered in Pennsylvania by providing that the marker fee shall be deemed a part of the vehicle registration fee (which was increased when the $25 marker fee was enacted). The marker fee was reduced to $5 (the administrative cost of issuing the marker) in 1982, when Pennsylvania enacted the second challenged statute, which, in general, imposes an annual axle tax on all trucks over a specified weight using Pennsylvania highways, and is assessed at the rate of $36 per vehicle axle. The same statute that enacted the axle tax also reduced the registration fees for pertinent vehicle weight classes by the amount of the axle tax usually applicable to vehicles in such classes. Appellant organizations, which represent interstate motor carriers whose vehicles are registered outside of Pennsylvania and who paid the $25 marker fee while it was in effect and are subject to the axle tax, brought separate actions in the Commonwealth Court of Pennsylvania challenging the constitutionality of the $25 marker fee and of the axle tax on the ground, inter alia, that both taxes discriminated against interstate commerce, since the entire economic burden of each tax fell on out-of-state vehicles because the 1980 statute "deemed" the marker fee for Pennsylvania vehicles to be a part of the registration fee, and the 1982 legislation granted Pennsylvania vehicles a reduction in registration fees that offset the newly imposed axle tax. The court accepted appellants' argument and held that the challenged taxes were unconstitutional. The Pennsylvania Supreme Court considered the cases together, and reversed.

Held:

1. The challenged taxes are unconstitutional, because the methods by which they are assessed discriminate against interstate commerce in a way that contradicts the Commerce Clause's central purpose of guaranteeing

Page 483 U. S. 267

a free trade area among States. The Clause prohibits a State, as here, from imposing a tax that places a much heavier burden on out-of-state businesses that compete in an interstate market than it imposes on its own residents who also engage in interstate commerce. The challenged taxes do not pass the "internal consistency" test, under which a state tax must be of a kind that, if applied by every jurisdiction, there would be no impermissible interference with free trade. The challenged taxes' inevitable effect is to threaten the free movement of commerce by placing a financial barrier around Pennsylvania. Pp. 483 U. S. 280-287.

2. The challenged taxes cannot be upheld on the ground that they reflect a reasonable charge for the privilege of using Pennsylvania's roads when considered alongside the high price that Pennsylvania-based trucks pay in registration fees. There is no merit to the contention that the axle tax does not discriminate against interstate commerce because domestic trucks, through payment of the registration fees, pay a higher price to use Pennsylvania's highways than those registered in other States. Pp. 483 U. S. 287-289.

3. Nor can the challenged taxes be upheld on the ground that they are no different from flat user fees recently upheld in other cases. Evansville-Vanderburgh Airport Authority District v. Delta Airlines, Inc.,405 U. S. 707, and Commonwealth Edison Co. v. Montana,453 U. S. 609, distinguished. Pp. 483 U. S. 289-292.

4. Earlier cases that support a State's authority to impose flat use taxes can no longer suffice to uphold flat taxes with the blatantly discriminatory consequences associated with Pennsylvania's marker fee and axle tax. More recent decisions have rejected the approach to the Commerce Clause taken in the earlier cases that focused primarily on the character of the privilege, rather than the practical consequences of the tax. A flat tax may not be upheld merely because the particular formula by which its charges are reckoned extends the same nominal privilege to interstate commerce that it extends to in-state activities. Although out-of-state carriers obtain a privilege to use Pennsylvania's highways that is nominally equivalent to that which local carriers receive, imposition of the challenged taxes for a privilege that is several times more valuable to a local business than to its out-of-state competitors is unquestionably discriminatory, and thus offends the Commerce Clause. While flat taxes may be valid when administrative difficulties make collection of more finely calibrated user charges impracticable, such justification is unavailable with regard to Pennsylvania's unapportioned marker fee and axle tax. Pp. 483 U. S. 292-297.

510 Pa. 430, 509 A.2d 838, reversed and remanded.

Page 483 U. S. 268

STEVENS, J., delivered the opinion of the Court, in which BRENNAN, WHITE, MARSHALL, and BLACKMUN, JJ., joined. O'CONNOR, J., filed a dissenting opinion, in which REHNQUIST, C.J., and POWELL, J., joined, post p. 483 U. S. 298. SCALIA, J., filed a dissenting opinion, in which REHNQUIST, C.J., joined, post p. 483 U. S. 303.

JUSTICE STEVENS delivered the opinion of the Court.

Again we are "asked to decide whether state taxes as applied to an interstate motor carrier run afoul of the commerce clause, Art. I, § 8, of the Federal Constitution." Aero Mayflower Transit Co. v. Board of Railroad Comm'rs, 332 U.S.

Page 483 U. S. 269

495, 332 U. S. 496 (1947). That statement of the question presented might equally well have introduced the Court's opinion in either Spector Motor Service, Inc. v. O'Connor,340 U. S. 602 (1951), or Complete Auto Transit, Inc. v. Brady,430 U. S. 274 (1977), which overruled Spector. In this case, we review the Supreme Court of Pennsylvania's judgment upholding the constitutionality of two Pennsylvania statutes which impose lump-sum annual taxes on the operation of trucks and truck tractors. Our task is by no means easy; the uneven course of decisions in this field reflects the difficulties of reconciling unrestricted access to the national market with each State's authority to collect its fair share of revenues from interstate commercial activity.

Appellants claim that these Pennsylvania statutes violate the principle that no State may discriminate against interstate commerce by enacting a tax which provides a competitive advantage to local business. [Footnote 1] The Pennsylvania Supreme Court upheld the taxes, interpreting them as facially neutral and in accord with a line of our decisions in the pre-Spector era approving flat taxes imposed on interstate truckers for the privilege of using a State's highway system. Before turning to the judgment of the State Supreme Court, we first describe the challenged taxes in some detail in the context of the State's revenue-gathering system, and explain why we find persuasive appellants' claims of discrimination. Despite appellees' defense of the revenue provisions as valid compensatory, user-fee, or flat taxes, the judgment of the State Supreme Court must be reversed.

Page 483 U. S. 270

I

The Commonwealth of Pennsylvania spends large sums of money to improve and maintain its highways and bridges. [Footnote 2] Passenger and cargo vehicles travel billions of miles on these highways every year. [Footnote 3] Operators of large trucks and tractor trailers engaged in interstate commerce make particularly heavy use of the State's highways. Their vehicles, which may be classified by the number of their axles or by their gross weight -- ranging from less than 5,000 pounds for the smallest class to 79,001-80,000 pounds for the 25th class -- not only transport cargo between Pennsylvania and out-of-state locations, but also use Pennsylvania's highways extensively as corridors connecting the States of the Northeast, the Southeast, and the Midwest. [Footnote 4] Because of their weight and size, trucks using the State's roads require the State to make higher road-related expenditures than would use of the roads by smaller vehicles alone. App. 30. The State's hilly terrain and frequently severe weather conditions enhance the

Page 483 U. S. 271

costs of highway maintenance. 510 Pa. 430, 433, 509 A.2d 838, 840 (1986).

These expenditures are financed, in substantial part, by three types of levies on users of Pennsylvania's highways: vehicle registration fees, fuel consumption taxes, and lump-sum annual fees which we will describe as "flat taxes." Although the two taxes at issue in this litigation are both flat taxes -- a $25 "marker fee" assessed from August 18, 1980, through March 31, 1983, and an "axle tax" imposed thereafter -- registration fees and fuel taxes are principal sources of revenue for road-related purposes, and therefore the mechanics of their collection provide necessary background for our analysis of the economic significance and constitutional validity of the challenged flat taxes.

Registration Fees

Owners of motor vehicles that are based in Pennsylvania must register them with the Department of Transportation and pay an annual registration fee. The weight of a truck or truck tractor [Footnote 5] determines the amount of the annual fee. Prior to 1980, there were 20 weight classifications, and the corresponding fees ranged from $39 to $606 per vehicle. App. 260. In 1980, the registration fees were increased and five new weight classes for heavier vehicles were added to the statutory schedule; from 1980 to 1982, the maximum registration fee was $1,125, for a vehicle weighing 79,001 to 80,000 pounds. Ibid. In 1982, the registration fees for vehicles weighing more than 26,000 pounds (classes 9-25) were reduced by multiples of $36 ranging up to a $180 reduction; thereafter, the maximum fee was $945. Ibid.

Pennsylvania, many other States, and Provinces of Canada participate in an apportioned registration scheme called the "International Registration Plan" (IRP). Participants in this plan share the registration fees for vehicles based in

Page 483 U. S. 272

their States with other IRP States in which the vehicles travel. The percentage of each vehicle's total registration fee that is allocated to each IRP State other than the State in which the vehicle is based is determined by dividing the total number of miles the vehicle traveled within the IRP State during the preceding year by its total mileage. The total fee payable to each State is the product of each State's total fee for full registration of each vehicle and that State's percentage share of the vehicle's mileage. Thus, if 30% of the mileage of a Pennsylvania-based vehicle was accrued in other States, Pennsylvania's share of the registration fee would be 70% of the full amount specified in its statutory schedule. On the other hand, if a vehicle based in another IRP State logged 40% of its mileage in Pennsylvania, its owner would be required to pay that portion of the Pennsylvania fee schedule to Pennsylvania. [Footnote 6] Pennsylvania collects no registration fees from motor carriers based in non-IRP States and, conversely, Pennsylvania-based vehicles pay no registration fees to non-IRP States. [Footnote 7]

Page 483 U. S. 273

In sum, the amount of each truck's registration fee is determined by the weight of the vehicle and, if the truck travels in other IRP States, in part by its in-state mileage. No vehicle is required to pay more than one full registration fee.

Fuel Consumption Taxes

Pennsylvania collects a fuel consumption tax in two ways. It imposes a per-gallon fuel tax on fuel purchased within the State. The State also requires trucks that travel less than 90% of their miles in Pennsylvania to pay a tax based on their miles traveled in Pennsylvania, reduced by the amount of the tax actually paid through fuel purchased at Pennsylvania pumps. See Pa. Stat.Ann., Tit. 72, §§ 2611d, 2614.4, and 2617.1-2617.26 (Purdon 1964 and Supp.1987). The amount of these taxes does not depend on the vehicle's State of registration.

The Flat Taxes

Pennsylvania requires an identification marker issued by the Department of Revenue to be affixed to every motor carrier vehicle. A motor carrier vehicle is a "truck, truck tractor or combination having a gross weight or registered gross weight in excess of 17,000 pounds." 75 Pa.Cons.Stat. § 102 (1984). Until 1980, the fee for the issuance of this marker was $2. In that year, the fee was increased to $25, but vehicles registered in Pennsylvania were exempted from the fee. The statute effected this exemption by providing that, for each vehicle registered in Pennsylvania, the "marker fee shall

Page 483 U. S. 274

be deemed a part of and included in the vehicle registration fee." § 2102(b).

The parties have stipulated that the administrative costs associated with the issuance of the identification markers total approximately $5 per vehicle. App. 22. In 1982, when it enacted the axle tax, Pennsylvania reduced the annual marker fee from $25 to $5 per vehicle. § 2102(b). Since 1982, then, the marker fee is sufficient only to meet the specific cost of issuing the marker, but the effect of the $25 marker fee from 1980 to 1982 was to impose a flat tax on vehicles registered in other States. This tax was, at least nominally, not imposed on Pennsylvania-registered vehicles. It should be noted, however, that the same statute that increased the marker fee in 1980 to $25 for out-of-state vehicles weighing more than 17,000 pounds also increased Pennsylvania's registration fees for such vehicles by amounts substantially larger than $25.

In 1982, Pennsylvania enacted its axle tax and, as noted, reduced the marker fee to $5 per vehicle. The axle tax applies to all trucks, truck tractors, and combinations weighing more than 26,000 pounds, whether registered in Pennsylvania or elsewhere; it requires an annual payment of $36 per vehicle axle. 75 Pa.Cons.Stat. § 9902 (1984). For example, the tax is $72 for a two-axle vehicle and $180 for a five-axle vehicle. If a truck travels less than 2,000 miles in Pennsylvania, however, it is entitled to a rebate: the axle tax paid multiplied by the ratio of the amount by which the vehicle's in-state mileage was short of 2,000 miles to 2,000 determines the rebate amount. § 9905. Moreover, the axle tax is excused when a trucker pays $25 for a trip permit for a period not exceeding five days. § 2102(d).

The same statute that enacted the axle tax in 1982 also reduced the registration fees for all weight classes of vehicles of more than 26,000 pounds. In classes 9-12, which generally include two-axle vehicles required to pay a $72 axle tax, the reduction amounted to $72; in classes 13-17, which usually

Page 483 U. S. 275

include three-axle vehicles subject to a $108 axle tax, it amounted to $108; in classes 18, 19, and 20, usually four-axle vehicles subject to a $144 axle tax, it amounted to $144, and in the five heaviest classes -- vehicle weights exceeding the permissible weight for four-axle vehicles -- it amounted to $180. [Footnote 8] In brief, the amounts of the reductions in all classes were a multiple of the $36 per axle which is used as the measure for the axle tax. App. 260.

II

Appellants represent a class of interstate motor carriers whose vehicles are registered outside of Pennsylvania and who paid the $25 marker fee while it was in effect and who have thereafter been subject to the axle tax. They brought separate actions in the Commonwealth Court of Pennsylvania challenging the constitutionality of the $25 marker fee and of the axle tax. In each case, appellants made two separate arguments based on the Commerce Clause of the Federal Constitution.

First, they argued that the entire economic burden of each tax fell on out-of-state vehicles, because the 1980 statute "deemed" the marker fee for Pennsylvania vehicles to be a part of the registration fee, and the 1982 legislation granted Pennsylvania vehicles a reduction in registration fees that

Page 483 U. S. 276

neatly offset the newly imposed axle tax. Second, they argued that, even if owners of vehicles registered in Pennsylvania, through payment of registration fees, shared the burden of the two flat taxes with owners of vehicles based elsewhere, the taxes were nevertheless discriminatory because both taxes imposed a much heavier charge per mile of highway usage by out-of-state vehicles. On the average, the Pennsylvania-based vehicles subject to the flat taxes travel about five times as many miles on Pennsylvania roads as do the out-of-state vehicles; correspondingly, the cost per mile of each of the flat taxes is approximately five times as high for out-of-state vehicles as for local vehicles. [Footnote 9] Although out-of-state and instate vehicles subject to the axle tax traveled approximately the same number of miles on Pennsylvania's highways, less than one-sixth of the State's total axle tax revenues were generated by Pennsylvania-based vehicles in fiscal years 1982-1983 and 1983-1984. [Footnote 10]

In both the marker fee case and the axle tax case, the Commonwealth Court accepted appellants' first argument, and did not consider the second. In the first case, the court reasoned:

Page 483 U. S. 277

"A state tax on interstate commerce does not offend the Commerce Clause . . . if that tax [1] is applied to an activity with a substantial nexus with the taxing state, [2] is fairly apportioned, [3] does not discriminate against interstate commerce, and [4] is fairly related to the services provided by the state. Complete Auto Transit, Inc. v. Brady,430 U. S. 274[, 430 U. S. 279] (1977). . . . Section 2102(b) facially fails the third prong of the Complete Auto standard which prohibits discrimination against interstate commerce. Notwithstanding legislative legerdemain in the insertion of the obfuscating term 'deemed,' Pennsylvania-registered vehicles were exempted from, and foreign-registered vehicles were subject to, the marker decal fee. 'The commerce clause forbids discrimination, whether forthright or ingenious.' Best & Co. v. Maxwell,311 U. S. 454, 311 U. S. 455 (1940) (footnote omitted)."

American Trucking Assns., Inc. v. Bloom, 77 Pa.Commw. 575, 581, 466 A.2d 755, 757 (1983). The Commonwealth Court ordered a refund of marker fee payments made after April 1, 1982. Id. at 581-582, 466 A.2d at 758. Sitting en banc, the Commonwealth Court overruled defendants' exceptions to the trial judge's order. American Trucking Assns., Inc. v. Bloom, 87 Pa.Commw. 345, 487 A.2d 468 (1985). The en banc court inferred from the legislature's nonenactment of increased registration fees to keep pace with the marker levy imposed on vehicles based outside of Pennsylvania "a legislative intent to exempt Pennsylvania-registered motor carriers from payment of the $25.00 marker fee." Id. at 350, 487 A.2d at 471.

Appellants in the case challenging the axle tax represent a class of all interstate motor carriers who own vehicles registered outside of Pennsylvania who are or will be subject to the tax, and a subclass consisting of such interstate motor carriers who are registered in any of the States or the Provinces of Canada that are not members of the IRP. Appellants contended that the axle tax, together with the simultaneous

Page 483 U. S. 278

reduction in registration fees substantially offsetting the axle tax for Pennsylvania-registered vehicles, is facially discriminatory, and in practice imposes the axle tax only on interstate motor carriers registered outside of Pennsylvania. Appellants also argued that the axle tax is an invalid flat tax wholly unrelated to the benefits received by interstate motor carriers. Sitting en banc, the Commonwealth Court declared that the axle tax violated the Commerce Clause and ordered a refund of axle tax payments made by affected class members after April 1, 1983. 87 Pa.Commw. 379, 487 A.2d 465 (1985). The court found that operators of foreign-registered vehicles bore the "full brunt of the tax," and concluded that the axle tax therefore "constitutes economic protectionism, and is facially invalid." Id. at 383, 487 A.2d at 467.

The Supreme Court of Pennsylvania considered the two cases together, and reversed. 510 Pa. 430, 509 A.2d 838 (1986). [Footnote 11] The Court began its analysis by noting that the prohibition against discrimination was included in the four-part test stated in Complete Auto Transit, Inc. v. Brady,430 U. S. 274 (1977), and that it was essential to focus on the "effect or economic consequences of the state tax upon interstate commerce." 510 Pa. at 449, 509 A.2d at 848.

Pursuing this inquiry, the State Supreme Court rejected the trial court's conclusion that the full burden of both taxes was imposed on foreign-registered vehicles. With respect to the marker fee, the Court considered irrelevant the legislative history supporting a contrary inference, because the plain language of the statute "deemed" a portion of the registration

Page 483 U. S. 279

fee to constitute payment of the marker fee for Pennsylvania vehicles. The Court thus found no discrimination in the operation of the marker fee, because the statute

"imposed a $25.00 marker fee on all motor carriers in the class represented by appellees and deemed a like amount of the simultaneous increase in Pennsylvania registration fees as the marker fee for Pennsylvania registered vehicles."

Id. at 453, 509 A.2d at 850. Moreover, even if the statute had not explicitly provided that Pennsylvania-registered vehicles are regarded as having paid a marker fee, the simultaneous increase in the registration fee when the $25 marker fee was enacted made it "apparent that the marker fee does not work any discrimination against interstate commerce in practical operation. " Ibid. .

The court thus viewed the marker fee as a flat tax applied equally on all vehicles using the State's highways. The court offered two reasons why this flat tax was not discriminatory despite its imposition of a greater cost per mile on non-Pennsylvania registered vehicles. First, relying on our opinions in Evansville-Vanderburgh Airport Authority District v. Delta Airlines, Inc.,405 U. S. 707 (1972), and Commonwealth Edison Co. v. Montana,453 U. S. 609 (1981), the Court reasoned that a State may impose a tax for the privilege of using its highways "so long as the flat fee charged is not manifestly disproportionate to the services rendered." 510 Pa. at 457, 509 A.2d at 852. Second, the Court found that interstate motor carriers could not protest that the burden of the flat fee fell too heavily upon them, for they "are free to use the Commonwealth's highways as often and for whatever distances they wish." Ibid.

In the axle tax case, the Court found that the tax was collected from Pennsylvania and non-Pennsylvania-registered vehicles alike, and thus presented no question of discrimination "[o]n its face and in actual operation." Id. at 459, 509 A.2d at 853. The Court acknowledged that a difficulty arose when it considered the tax together with the statutory

Page 483 U. S. 280

reduction in 1982 of registration fees paid by Pennsylvania-based vehicles subject to the axle tax, but concluded that, even though the reduction in registration fees offset the axle taxes for Pennsylvania-based vehicles, this reduction had to be viewed against the earlier increase in 1980 of registration fees. According to the State Supreme Court, the net effect of the restructuring of the tax system over the 2-year period was

"to enact a compensatory tax to neutralize or partially offset an economic advantage previously enjoyed by interstate commerce to the disadvantage of local commerce that was caused by operation of that state's taxing scheme."

Id. at 462, 509 A.2d at 855. Taking all provisions of the State's highway user fee system into account, the court reasoned that members of appellants' class bore less of the tax burden than Pennsylvania-registered motor vehicles. Id. at 460-463, 509 A.2d at 854-855. The Court concluded that,

"in easing the burden on Pennsylvania registered vehicles, the Commonwealth has neither disadvantaged interstate commerce nor favored local commerce, and the axle tax does not, therefore, discriminate against interstate commerce."

Id. at 462, 509 A.2d at 855.

III

Although we have described our own decisions in this area as a "quagmire" of judicial responses to specific state tax measures, Northwestern States Portland Cement Co. v. Minnesota,358 U. S. 450, 358 U. S. 457-458 (1959), we have steadfastly adhered to the central tenet that the Commerce Clause "by its own force created an area of trade free from interference by the States." Boston Stock Exchange v. State Tax Comm'n,429 U. S. 318, 429 U. S. 328 (1977). See also Armco Inc. v. Hardesty,467 U. S. 638, 467 U. S. 642 (1984). One primary consequence of this constitutional restriction on state taxing powers, frequently asserted in litigation, is that "a State may not tax a transaction or incident more heavily when it crosses state lines than when it occurs entirely within the State." Ibid.; see also 466 U. S. v. Tully, 466

Page 483 U. S. 281

U.S. 388, 466 U. S. 403 (1984). In its guarantee of a free trade area among States, however, the Commerce Clause has a deeper meaning that may be implicated even though state provisions, such as the ones reviewed here, do not allocate tax burdens between insiders and outsiders in a manner that is facially discriminatory. [Footnote 12]

The parties broadly state the constitutional question in this appeal as whether Pennsylvania's flat taxes result in a blanket discrimination against interstate commerce. The operator of a Pennsylvania-based vehicle that engages in interstate commerce, however, has no apparent quarrel with the challenged flat taxes; he is "deemed" to pay the $25 marker fee through his registration fee, and the axle taxes he paid beginning in 1982 were generally offset by the statutory reduction

Page 483 U. S. 282

in vehicle registration fees. But some operators of vehicles based in other States or Provinces have neither consolation, for they have paid registration fees to their own jurisdictions and still face Pennsylvania's axle taxes. The precise issue is therefore more subtle: do the methods by which the flat taxes are assessed discriminate against some participants in interstate commerce in a way that contradicts the central purpose of the Commerce Clause? We find dispositive those of our precedents which make it clear that the Commerce Clause prohibits a State from imposing a heavier tax burden on out-of-state businesses that compete in an interstate market than it imposes on its own residents who also engage in commerce among States. [Footnote 13]

The way in which a tax levied on participants in interstate commerce is measured and assessed bears directly on whether it implicates central Commerce Clause values. The method of assessing the marker and axle taxes in this case on Pennsylvania-based vehicles and on other vehicles establishes that the State is not treating the two types of vehicles with an even hand. There are important and obvious differences of a constitutional magnitude between the State's registration fees and fuel taxes, on the one hand, and its flat taxes, on the other.

The State's vehicle registration fee has its counterpart in every other State and the District of Columbia. See 2 CCH State Tax Guide

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